Mortgage Market Guide Weekly Issue 4

Last Week in Review: Good news moved the markets. How were home loan rates impacted?

"Happy days are here again." Milton Ager and Jack Yellen. There was more evidence last week that the housing market is improving. But not everything that happened last week was cause for song. Read on to learn more.  

Last week, the Federal Housing Finance Agency (FHFA) reported that home prices rose by 0.6% in November from October, and that they are up 5.6% from the year ended in November. These numbers are based on data received from Fannie Mae or Freddie Mac mortgages. In addition, both Existing Home Sales and New Home Sales for December, though below estimates, were strong numbers for 2012.

But the housing market wasn't the only area where we saw positive economic data last week. There was good economic news out of Germany, plus several companies here reported strong earnings, including Procter & Gamble and Honeywell. In addition, weekly Initial Jobless Claims dropped by 5,000 to 330,000 in the latest survey: this is the lowest level since January of 2008. It is important to note that estimates were used for three states, including Virginia and California, so the numbers could be distorted.

How were home loan rates impacted? The mix of good economic news last week caused investors to move their money out of Bonds, which are considered safer investments, and into Stocks in the hopes of taking advantage of gains. And since home loan rates are tied to Mortgage Bonds, as Bonds worsened last week, so did home loan rates. But rates remain close to historic lows, and now is still a great time to consider a home purchase or refinance. Let me know if I can answer any questions at all for you or your clients. 

Forecast for the Week: A busy week is ahead, with news on inflation, consumer confidence and spending, manufacturing, the labor market and more.

 A full slate of economic reports is ahead, with several key data points that could move the markets.

• Monday's Durable Goods Orders and Wednesday's Gross Domestic Product Report will give us signs as to how our economy is doing.
• Monday also brings more news on the housing market with Pending Home Sales, which will be followed by Tuesday's Case Shiller 20-city Home Price Index.
• We'll get a sense of how the consumer is feeling with Consumer Confidence on Tuesday and the Consumer Sentiment Index on Friday.
• Thursday brings several key economic reports, including Initial Jobless Claims, Chicago PMI, Personal Income and Spending, and the inflation-reading Core Personal Consumption Expenditure, the Fed's favorite measure of inflation.
• Rounding out the week, the all-important Non-Farm Payrolls will be reported along with the Unemployment Rate. Also on Friday, the ISM Index will be delivered.

In addition, the Federal Reserve will meet for its two-day meeting of the Federal Open Market Committee, with the monetary policy statement released at 2:15pm ET on Wednesday. The statement will be dissected for any hints on the current purchase programs of Mortgage Backed and Treasury Securities. If there is any talk of halting the programs this year, it could lead to lower Bond prices and a push higher in home loan rates.

Remember: Weak economic news normally causes money to flow out of Stocks and into Bonds, helping Bonds and home loan rates improve, while strong economic news normally has the opposite result. The chart below shows Mortgage Backed Securities (MBS), which are the type of Bond that home loan rates are based on.

When you see these Bond prices moving higher, it means home loan rates are improving -- and when they are moving lower, home loan rates are getting worse.

To go one step further -- a red "candle" means that MBS worsened during the day, while a green "candle" means MBS improved during the day. Depending on how dramatic the changes were on any given day, this can cause rate changes throughout the day, as well as on the rate sheets we start with each morning.

As you can see in the chart below, Bonds and home loan rates worsened after positive economic data was released last week. I'll continue to watch all the news and market action closely. 

Chart: Fannie Mae 3.0% Mortgage Bond (Friday Jan 25, 2013)

View: There's a new scam targeting small businesses. See important details below.

FTC Warns of New E-mail Scam
Small-business owners are the target of this phishing scheme.
By Cameron Huddleston, Kiplinger.com

The Federal Trade Commission is warning small-business owners not to open e-mails with the subject line "Notification of Consumer Complaint." The e-mail falsely claims to be from the FTC and states that a complaint has been filed with the government agency against their company.

E-mails of this sort often prompt recipients to click on a link or open an attachment. However, these links and attachments usually install malware or a virus on your computer if you click on them. Then you're at risk of having personal information stored on your computer stolen.

The FTC says that you should delete such e-mails. It also offers tips on how to reduce your risk of downloading malicious software onto your computer.

• Keep your security software updated by setting it to update automatically.
• Don't buy software in response to pop-up messages on your computer or e-mails. Scammers use ads that claim to have scanned your computer and detected malware to get people to install malicious software.
• Make sure your Internet browser security setting is high enough to detect unauthorized downloads. For example, Internet Explorer users should have their security setting at medium, at a minimum.
• Use a pop-up blocker on your browser (look for the security tab in your browser's options). Links in pop-ups can contain malware.

If you notice that your computer is running slower, crashes often or repeatedly displays error messages, it may have a virus. Other warnings signs include new toolbars or icons on your desktop, a barrage of pop-ups, Web sites that you didn't intend to visit displaying on your screen and a laptop battery that drains quickly.

See Protect Yourself From New Phishing Schemes for more advice on avoiding fraudulent e-mails.

Reprinted with permission. All Contents ©2013 The Kiplinger Washington Editors. Kiplinger.com 

Economic Calendar for the Week of January 28 - February 01

The material contained in this newsletter is provided by a third party to real estate, financial services and other professionals only for their use and the use of their clients. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, we do not make any representations as to its accuracy or completeness and as a result, there is no guarantee it is without errors.

As your mortgage professional, I am sending you the MMG WEEKLY because I am committed to keeping you updated on the economic events that impact interest rates and how they may affect you.